CIPS L4M3 Exam - Topic 2 Question 44 Discussion

Actual exam question for CIPS's L4M3 exam

Question #: 44
Topic #: 2

A procurement manager is preparing a long-term contract with a major supplier. She decides to use the variable pricing arrangement using price indices. The payment terms describe the circumstances and mechanism where the price is allowed to change. In order to successfully manage this type of contract, the buying organisation should have...?

AGood market knowledge

BSelection of base year

CValue for money

DEconomy of scale

Show Suggested Answer

Suggested Answer: C

Performance management framework often consists of KPIs, targets and consequences that arise from achieved scores. To ensure that the framework has binding effect on contracting parties, it should be developed, appended to the main contract document and agreed by both parties. So the answer should be 'Yes, because the framework should have legal standing as a part of contract'.

LO 1, AC 1.1

by Lilli at Sep 18, 2024, 09:37 PM

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Samira

7 months ago

Value for money should always be a priority!

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Tammi

8 months ago

Surprised this is even a question, isn't it obvious?

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Janine

8 months ago

I think selection of base year is more important though.

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Huey

8 months ago

Definitely agree, you need to know the trends.

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Yolando

8 months ago

Good market knowledge is key!

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Justine

9 months ago

Economy of scale could play a role, but I don't recall it being a key focus in our studies about variable pricing arrangements.

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Gayla

9 months ago

Value for money seems important, but I feel like it might not directly relate to managing the price changes in this context.

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Willis

9 months ago

I remember a practice question that emphasized the importance of selecting a base year for price indices. It might be relevant here too.

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Reita

9 months ago

I think having good market knowledge is crucial for managing variable pricing contracts, but I'm not entirely sure if that's the only factor.

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Jamika

9 months ago

I'm feeling a bit lost on this one. What exactly are we looking for in terms of managing a variable pricing contract? Is it just about having good market knowledge, or are there other important factors to consider?

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Devorah

9 months ago

Okay, I've got this. The buying organization needs to have a good understanding of the selection of the base year for the price indices. That's going to be crucial for managing the contract effectively over the long term.

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Mollie

9 months ago

This seems like a straightforward question about managing variable pricing contracts. I think the key is having good market knowledge to understand how the price indices work and how to select the appropriate base year.

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Annalee

9 months ago

Hmm, I'm a bit unsure about this one. There are a few different options, and I'm not entirely sure which one is the best answer. I'll have to think it through carefully.

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Chaya

1 year ago

Wow, these options are a mixed bag. I'm going to have to go with B). The base year selection is just too important to overlook.

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Glenn

1 year ago

Ha! D) Economy of scale? Really? That's not even close to being relevant for this type of contract management. I'm going with A).

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Kelvin

1 year ago

User 4: A) Good market knowledge and B) Selection of base year are both key factors in managing variable pricing contracts.

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Mozelle

1 year ago

User 3: C) Value for money is essential to make sure the contract is beneficial for both parties.

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Devon

1 year ago

User 2: B) Selection of base year is also important to ensure accurate price adjustments.

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Aileen

1 year ago

User 1: A) Good market knowledge is crucial for managing variable pricing contracts.

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Giuseppe

1 year ago

Hmm, I'm not sure. I think C) Value for money is the key here. The goal should be to ensure the contract provides the best value for the organization.

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